Your phone bills in India are about to go down
What's the story
The Indian government is scrapping spectrum usage charges (SUC) on airwaves bought by telecom companies before September 2021, the Times of India has reported.
The move is expected to give a major financial relief to top telcos like Vodafone Idea, Reliance Jio, and Bharti Airtel.
It will help these firms save cash while expanding their 5G services and improving their network. Phone bills for customers are also expected to go down.
Past action
Previous decision to remove SUC for post-2021 auctions
In June 2022, the Department of Telecommunications (DoT) had decided to remove SUC for bandwidth auctioned after September 15, 2021.
However, no action was taken on the spectrum purchased through auctions before that.
The upcoming waiver, which is expected to be approved soon, aims at offering relief to telecom companies so that their network expansion work continues unabated.
Financial impact
SUC contributes to telcos' adjusted gross revenue
The SUC payout makes up about 3-4% of the adjusted gross revenue (AGR) of telcos.
Apart from this, the firms also pay an 8% license fee to the government, including 5% toward Universal Service Obligation Fund (USOF).
The move to waive off SUC for pre-2021 auctions was driven by the aggressive bidding process that had already ensured best prices for airwaves.
Beneficiary
Vodafone Idea to benefit significantly from SUC waiver
Vodafone Idea would be one of the biggest beneficiaries of this move, considering it carries a debt of over ₹2 lakh crore.
The company could stand to gain as much as ₹8,000 crore from this development.
The waiver comes as local companies gear up for Elon Musk's entry into the telecom sector through Starlink.
Tax obligation
Starlink to pay tax on its spectrum
Interestingly, while local firms will see SUC obligations being waived off completely, Starlink will need to pay tax on its spectrum.
This is because Starlink is getting the spectrum on an administrative basis instead of competitive auctions.
Any company getting the spectrum through government allocation at a pre-determined price will need to pay tax on it.